Make Cash King in the Healthcare Reform

Cash payers should get the best available rate for health care services.

It is becoming more and more apparent that Republican reforms of the ACA will drive people out of the health insurance market by the millions.

How to lessen the sting to these unfortunate health care consumers? Mandate that cash-paying patients get a rate not to exceed the rate that Medicare pays for the same service.

By capping fees to the corresponding DRG (diagnostic related group) prices, patients without insurance will avoid being victimized by unscrupulous medical providers who have separate price lists for uninsured patients, lists where the prices are often more than double what they accept from insurers.

And, why not? When a provider sends a claim in to the insurance company they have to wait weeks or months to be paid, risk getting certain charges denied, or risk not getting paid at all if the patient has not yet met their deductible and is unable or unwilling to pay.

Cash at time of service solves all these problems: it lowers costs to doctors and service providers, and lowers the out-of-pocket costs to the patient.

Hopefully, the Republicans can include this sort of common-sense consumer protection that also benefits the service provider into their reform of Obamacare.

What Happened to the AFFORDABLE Care Act?

The red line is the per member cost of health insurance in the individual market, which is exploding.

The Republicans in Congress are absolutely correct to assert that Obamacare is broken. The Affordable Care Act (ACA), as Obamacare is officially known, was designed to offer access to health insurance for millions who were locked out because of preexisting conditions while simultaneously decreasing costs for everyone by mandating that young, healthy people join the marketplace (or pay a fine).

Unfortunately, as an S&P Global Institute report has found, the system has proven to be fatally flawed and the individual marketplace is collapsing under its own weight, crushing family budgets and the dream of health care for all in the process.

The fundamental problem is that the ACA shifted risk that private insurers were never comfortable accepting to the private market without government-run alternative plans as a back-stop to exhorbitant premium increases. This resulted in many companies coming to the conclusion that the ACA marketplace is fundamentally unworkable and leaving it altogether. With fewer providers in each marketplace, and therefore less competition, premiums have risen dramatically.

In a nutshell, Obama never should have ordered private companies, whose obligation is to maintain profitability (or, at least positive cash flow, in the case of non-profit providers) to provide health insurance to the very sick. As I mentioned in a previous post, so-called health care "super-consumers", who only amount to 5% of the total population, demand 50% of all health care dollars. Prior to the ACA, many of these individuals were getting their health care through emergency rooms, with the bills going to a federal fund set up to help emergency rooms provide these services, but not through the individual health insurance marketplace.

Now, these individuals are able to join the individual marketplace and their bills are being paid by the insurance companies, causing the premiums for the other 95% of those in the individual marketplace to spiral out of control. That this was going to happen should have been patently obvious from the outset.

So, how to sort out this mess? I have a list of proposals:

• Allow private insurance companies to subject new applicants to medical underwriting.
• Keep the mandate that everyone carry health insurance or pay a fine.
• Provide government-run insurance policies for all those who cannot get private insurance.
• Provide goverment assistance to cap out-of-pocket individual insurance premium costs to 6.5% of adjusted gross income (the current tax credit model is fine).
• Empower the FDA to set list prices for patent and off-patent drugs, with annual review and adjustment.

This is very similar to the German model, which I have referred to as a good alternative to the mess we call health care adminstration in the United States.

By any measure, the U.S. health care model is broken. In the chart below, the yellow line that is deviating from the group are U.S. healthcare expenditures as a percentage of GDP:

In 2015 the U.S. was spending nearly 17% of GDP on health care, compared to less than 11% in Germany. To put this in perspective, the U.S. spent almost $60,000 per person in 2015 on health care expenses, compared to about $42,000 per person in Germany.

What I believe is occurring in the U.S. is that the outsized growth of health care as a portion of GDP since the 1980s has effective resulted in a massive concentration of wealth in the sector, and it is this high concentration of wealth which is fueling the opposition to any real cost-cutting or efficiency reforms.

For example, the compromise that Obama was forced to accept when he lobbied for passage of ACA was that there would be no governement alternative to the private and non-profit insurance companies, which effectively guaranteed that participation rates AND premiums would rise, against a backdrop of health care costs that continued their incessant march to higher and higher levels. Government-sponsored plans would have been a bulwark against these premium and cost increases, since the federal government already has demonstrated the ability to negotiate lower rates from hospitals than the largest insurance companies are able.

I really believe that we have to stop the silly, amateurish game of trying to design a better health care system, when the Germans have already achieved this goal. Their social model started as early as 1883 and has had over a century to evolve and reform. At the heart of their model is the premise that access to the health care system is the right of all Germans. From there it uses a blend of over 1,000 different plans, both public and private, combined with a creative mix of taxes and subsidies, to achieve its overarching mission. And, by almost any measure, it excels in providing health care to it citizens, something that the United States has never been able to claim.